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Political Environment

The document discusses the political environment faced by international businesses. It covers topics like the stability of foreign governments and policies, political risks such as confiscation and expropriation, assessing political vulnerability, and ways to reduce political risks through forecasting, insurance, and minimizing exposure. The key concerns for marketers are stable policies, understanding political systems and parties, and managing risks from government actions.

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Jay Bhatia
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163 views18 pages

Political Environment

The document discusses the political environment faced by international businesses. It covers topics like the stability of foreign governments and policies, political risks such as confiscation and expropriation, assessing political vulnerability, and ways to reduce political risks through forecasting, insurance, and minimizing exposure. The key concerns for marketers are stable policies, understanding political systems and parties, and managing risks from government actions.

Uploaded by

Jay Bhatia
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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The Political Environment

1
 Stability of Government and Its Policies
 Political Risks of Global Business
 Assessing Political Vulnerability
 Reducing Political Vulnerability

2
Stability of the Government
 One of the top concerns of an
international business is the stability of
the government and its policies.
 The international marketer is not as
concerned with who is in power as much
as she is concerned with the stability of the
policies that affect the marketing of her
product.

3
Stability Questions
 How often does the government change
power within the country?
 Is there predictability of how stable the
government and/or the government
policies?

4
Multiplicity of Political Systems
 Forms of Government
 Parliamentary
 Absolutist

5
Political Parties
 An international marketer needs to
understand the philosophies of the
major political parties.
 Two-party system
 Multi-party system
 Single -party system

6
Political Parties Cont.
 Consideration needs to be given to
what influential factors affect the
country’s political parties.
 E.g., Lobbyist groups

7
Nationalism Cont.
 Nationalism can cause:
 Restriction on imports
 Tariffs
 Restrictive barriers
 A desire to only by commodities produced
in the home country

8
Political Risk of Global
Business
 Risks in international marketing can
range from:
 Confiscation
 Expropriation
 Domestication

9
Confiscation
 One of the major political risks that can occur
is the confiscation of assets.
 This is when a government goes into a
business and seizes all of its assets without
compensation.

10
Expropriation
 Expropriation is a lesser form of
confiscation because the government
will make some compensation available
for seizing the assets.

11
Domestication
 Domestication is when a foreign
government tries to take foreign
investment and transfer it to national
control and ownership.

12
Domestication Cont.
 Domestication can occur by the
government mandating the following:
 Transfer ownership to nationals
 Managers in the company must be
nationals
 Decisions must be made by nationals
 Inputs for the product are produced locally

13
 General Instability Risk-uncertainty about the
future viability of a host country’s political
system
 Ownership/Control risk-possibility that a host
govt. might take actions to restrict an
investors ownership
 Operation risk-uncertainty about business
operations like marketing, finance etc.
 Transfer risk-acts which may constrain the
ability of the subsidiary to transfer payments,
capital or profit out of host country to parent
firm.

14
Forecasting Political Risk
 Forecasting can occur using in-house
political analysis or hiring external
sources that specialize in examining
political risk.
 This analysis can be used to help
determine whether you should market your
product in the foreign market and what
conditions must be met for you to pull out
off the foreign market.

15
Management of Political Risk
 Avoidance- screening out politically
uncertain countries
 Insurance-strategy to shift the risk to other
parties
 Private Insurance
 Government Insurance
 MIGA(Multilateral Investment Guarantee
Agency)
16
Measures to Minimize Political
Risk
 Stimulation of the National Economy
 Employment of Nationals
 Sharing ownership
 Being Civic Minded
 Political Neutrality
 Behind the Scene Lobby
 Observation of Political mood and Reduction
of Exopsure
17
Economic Environment
 Economic Systems
 Communism
 Socialism
 Capitalism
 Economic Indicators

18

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